Jane StreetTraderQuantitative TraderQuestion #110
Person A and B are going to play a coin toss game. There is an initial score of 0, and whenever a head or tail appears, the score increases by 1 or decreases by 1, respectively. The coin is tossed repeatedly until one wins, that is, when the score reaches +2 or -2, A or B wins the game. There is also an initial stake of $1 for the game and person A has the option to double the stake before each coin toss. When one person wins the game, the other player needs to pay the current stake to the winner. The question is: if you are person A, what is your optimal strategy and what is your highest expected payoff in the game?
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